We believe the impending change of guard at CIMB is unlikely to impact the group in the near term, as it already has in place a full and seasoned management  line-up.  That  said, we  believe  there will still  be  lingering concerns (eg leadership, longer-term direction) and this could weigh on the  performance  of  its  share  price.  As  valuations  appear  decent,  we keep our NEUTRAL call and MYR7.75 FV.

• Change  of  guard.  CIMB  announced  yesterday  a  leadership  transition plan. Effective 1 Sept,  Dato’ Sri Nazir Razak  will  relinquish his role as group  CEO  and  take  over  from  Tan  Sri  Md  Nor  Yusof  as  the  nonexecutive  chairman of CIMB Group.  Dato’ Sri Nazir will also be chairing an  executive  committee  (to  be  established),  which  will  focus  on  key strategic  matters  and  enhance  the  board’s  oversight  functions.  Apart from  the  above  changes,  he  will  be  nominated  as  chairman  of  CIMB Investment Bank  (effective 1 Sept)  but  is expected to retain  his roles  as president  commissioner  of  CIMB  Niaga  and  deputy  chairman  of  CIMB Bank.
• Highlights  from  the  conference  call.  Management  said  that  no  final decision  has  been  made  with  respect  to  the  new  group  CEO  and remained tight-lipped as to whether the candidate will be an internal or external one.  However,  it  was hopeful the candidate would  receive  the necessary approvals before 1 Sept 2014. The incoming CEO is expected to  work  closely  with  Dato’  Sri  Nazir  and  would  also  need  to  be  wellaccepted by the existing management.  Dato’ Sri Nazir also said that  he will still be playing an active role as chairman and will still be hands-on in strategic matters. As an example, he highlighted his roles (as mentioned above) in the key operating subsidiaries within the group.  He does not think there would be any major shift in the group’s  strategic direction nor does  he  expect  any  changes  to  the  current  leadership/management structure.
• Forecasts and investment case.  We keep our earnings forecasts  and GGM-derived  FV  of  MYR7.75.  Our  GGM  assumes  a  10.3%  cost  of equity,  13.2%  ROE  and  6%  long-term  growth.  While  we  think  it  would still be business as usual in the near  term,  given that CIMB already has in  place  a  full  management  line-up,  we  believe  there  will  still  likely  be lingering concerns and question marks over the latest development (eg identity of the  incoming successor, strategic directions ahead) and this could weigh down  its  share price performance.  In mitigation, valuations are not excessive, in our view. Maintain NEUTRAL.

Source: RHB